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Divesting from coal: good intention, bad decision

Two days ago, Stanford’s Board of Trustees (BoT) decided that Stanford University will not make direct investments of endowment funds in publicly traded companies whose principal business is the mining of coal for use in energy generation. Praising this effort, President Hennessy stated that “moving away from coal in the investment context is a small but constructive step while work continues at Stanford and elsewhere to develop broadly viable sustainable energy solutions for the future.” Simply put, our University has declared that coal is bad, and we should abandon it. As two Stanford researchers whose work focuses on reducing carbon emissions from energy systems, we believe that Stanford’s BoT divestment from coal was a bad decision, rushed and misguided, and we care to share with you why.

Before we begin, we must emphasize two key points. First, we believe climate change is real and happening, and we have an undeniable responsibility to fight it. Second, we believe that reducing carbon dioxide (CO2) emissions is crucial to mitigate climate change impacts. That said, we also believe that divestment from coal—or fossil fuels in general—is not the right answer, and when compared to other options to reduce climate impacts, divesting from coal mines is clearly not the best solution. As a globally renowned university, Stanford has three big shoes to fill: as an investor, an educator and a research institute. Because Stanford does not have any formal legislative or regulatory authority, we will focus on what Stanford can actually do, or let’s say, could have done.

It’s the Emissions, not the Fossil-Fuels

As a basic scientific fact, we first note that the cause of our climate problems is the emissions, not the fossil fuels. Coal, oil and natural gas are useful forms of energy, but the CO2 emissions that result from burning them is what contributes to climate change. Thus, in simple terms, Stanford’s green war should focus on the emissions, not on the fuels. Accordingly, if Stanford is really keen on “divesting from something,” the actions that we should take, in order of effectiveness, are as follows: Divest from emissions, divest from burning the fuel and lastly, divest from producing the fuel. The BoT chose the least effective of the three.

The main question becomes: How would we divest from emissions or burning the fuel, rather than from producing the fuel?

Divest from Emissions: Invest in Clean Energy

The recipe here is simple: Keep the investments the way they are, and use the returns from those investments to fund clean energy. Focusing on coal: The majority of coal emissions do not come from the mines, but rather from the smoke stacks of the combustion sources.

So how do we reduce those emissions? We capture them! Carbon Capture and Storage (CCS) is a technology that has been studied, tested, and deployed worldwide for years for similar applications. There’s even a class that teaches CCS right here at Stanford! (ENERGY 253, if you are interested). Instead of divesting from coal and closing mines, why doesn’t Stanford invest in new CCS companies?

Another example, which is rather obvious: rooftop solar. After reading this article, take a trip to Hoover Tower and have a look at how many empty roofs on campus can be retrofitted with solar panels. Instead of putting miners out of work, why doesn’t Stanford create more jobs by increasing investment in solar energy?

Frankly, we argue, isn’t it easier and more reasonable to focus our investment efforts on reducing emissions on campus first before targeting the coal mines? Also, speaking of efforts on campus, the light by which you are now reading this article (unless you are outside) is probably powered by electricity generated from natural gas, the fossil fuel that Stanford decided to use to power the campus for years to come through the SESI project. We find it curious that the University chose to divest from “off-campus coal” but not “on-campus natural gas,” and we wonder if this half-baked approach is due to political or financial considerations that are only tangentially relevant to the mission of addressing climate change.

Divest from Fossil-Fuel Burning: Why not utilities?

The miners suffer a serious disadvantage: they either mine coal, or they go home. They simply have no other option to avoid unemployment if their mines shut down. However, for power plants (think utilities), which are the actual sources of emissions, the options are numerous. Stanford could make a conditional yet credible threat of divestment from utilities: “Reduce your emissions or we pull our funding.” If the utilities want to continue using cheap coal, they will have to invest in CCS (adding more jobs!); otherwise, they can be creative in finding solutions like fuel mixing, peak-shaving, demand-side management, efficiency improvements or a whole host of other options, all while re-allocating their human capital and thus reducing job losses. So why didn’t Stanford decide to divest from utilities?

Divest from Fossil-Fuel Production: Why not Oil and/or Natural Gas?

We wonder why Stanford chose to divest from coal, but not petroleum. If coal is “abandoned” because it results in carbon emissions, why are oil and natural gas “spared”? Presumably we have fossil fuel investments because they are profitable. Reiterating the first point, rather than blacklisting fossil fuels, why not use their investment revenues to fund research on emissions reduction and renewable energy?

Finally, we conclude with a few words on the implications this decision might have on Stanford’s image as a leading educational institute. By declaring coal a bad fuel not worthy of investment, what message are we communicating to the world? To scholars, are we declaring CCS research dead? Nationally, are we telling states like Indiana and Wyoming that we believe they should not power their hospitals because the majority of that power comes from burning coal? Internationally, are we telling China and India that we don’t support their efforts to extend electricity to hundreds of millions of underprivileged citizens because it comes from coal?

We, in Silicon Valley, are privileged to be living in a developed community that can—for the most part—support switching away from coal. However, outside our “Silicon Valley bubble,” the world is different. We really fear this decision might distort Stanford’s image as a beacon of impartial energy innovation. Rather than advocating for a lively conversation and a comprehensive portfolio of solutions to clean our energy system, this decision picks winners and losers and might disproportionately harm disadvantaged populations.

We are sure that the Stanford Board of Trustees cares deeply about climate change, and as Stanford energy scholars, we are committed to addressing this global problem by exploring new pathways to clean energy solutions. In our opinion, however, there is a long list of options to address climate change, and divestment from coal mining is at the bottom of this list.


Karim Farhat

Scott McNally


Karim Farhat is a PhD Student in Management Science and Engineering and a Research Fellow at the Steyer-Taylor Center for Energy Policy and Finance at Stanford University. Contact him at Scott McNally is a Masters student in Energy Resources Engineering at Stanford University and a Masters student in Public Policy at Harvard University. Contact him at

  • PhilipKGlass

    Why divest from coal before oil or natural gas? Because coal produces higher emissions per unit of energy produced than oil or gas. It makes sense to target the worst offenders first. Nothing about this campaign precludes a future oil or gas divestment campaign.

    Why not promote carbon capture and storage instead of abandoning coal? Because the number of coal-burning facilities with CCS can currently be counted on one’s fingers. Because divestment can produce results rapidly but new CCS plants take years to build. Because once you add CCS a coal plant produces electricity at higher costs than a nuclear plant or wind farm. There’s probably centuries of life left in coal mining for metallurgical use or as a raw feedstock for organic chemicals, but it’s hard to see how it could be the future of clean energy. When coal energy is cheap it’s not clean and when it’s clean it’s not any cheaper than alternatives.

    Why not install rooftop solar? Actually, I have no objections at all to this. It’s a good idea. But unless Stanford’s portfolio had a truly minuscule exposure to coal mining companies, rooftop solar on Stanford property would not be able to curb emissions to the same extent as putting financial pressure on coal producers.

  • job policy

    “The miners suffer a serious disadvantage: they either mine coal, or they go home. They simply have no other option to avoid unemployment if their mines shut down.”

    We as a society should support worker transition through mid-career education and a social safety net. As a matter of principle, our work force must be agile. That’s just good policy, period, in the global economy. In this particular case, we should not be held hostage to dirty energy because of the threat of job loss.

  • AEA

    Brought to you by Shell!

  • Yeah

    Because that’s going to work

  • thomas

    This article is obvious propaganda from an ill-informed source, making poor excuses such as “loss of jobs”. Should we not close illegal drug mafias because people would lose their jobs too? That’s an insane argument, and it proves that this article is purely made to MISINFORM the community.

  • AJ

    I have a difficult time agreeing with many of the arguments found in this piece. But if you throw a lot of darts simultaneously at a board, surely at least one will come close to hitting the mark. The following line comes to mind: “Keep the investments the way they are, and use the returns from those investments to fund clean energy.”

    Exactly! If one looks at some of the research going on in the Engineering, Biosciences, Geology, and related departments, there is a plethora of promise. While some of this research is federally funded, a good portion is funded from Stanford’s endowment, of which fossil fuels are ostensibly a lucrative contributor.

    I recall reading about Stanford investing in clean-energy projects proposed primarily by teams of graduate students; unfortunately only 1/4 of the submissions were able to receive funding, even though the judges stated that many rejected projects showed immense potential. The decision to divest will diminish these research opportunities further. But unlike divesting, which is wholly symbolic, the research and development carried out at Stanford is actually trying to mitigate global climate change in a very real way.

    I am not firmly opposed to this decision; for instance I am glad that only coal, and not fossil fuels as a whole, were targeted. In many areas of the world, fossil fuels are not barrels of sin but rather a chance to gain status as a “developed nation.” It is also fitting with our university’s image as a global leader in science, technology, and progress that we were the first major university to divest. Perhaps with the passage of time it will become clear that in this regard, Stanford was on the “right side of history.”

    But while I appreciate the symbolism of Stanford’s decision, I question what R&D opportunities will be lost as a result. We will never know.

  • netgk

    Great reasoning, Yeah. What a troll. I totally agree with Job Policy. We should support job transition for those whose jobs we are cutting. It is the fair way to do it. The miners shouldn’t bear the brunt of the impact of our nation’s shifting politics.